PRICE LEVELS IN CANADA AND THE NORTH ATLANTIC
ECONOMY OF THE MID-19TH CENTURY: A NEW
CANADIAN WHOLESALE PRICE INDEX
by
Donald G. Paterson
and
Ronald A. Shearer
Department of Economics
The University of British Columbia
July 2001
Discussion Paper No.: 01-18
DEPARTMENT OF ECONOMICS
THE UNIVERSITY OF BRITISH COLUMBIA
VANCOUVER, CANADA V6T 1Z1
http://www.econ.ubc.ca
Price Levels in Canada and the North Atlantic Economy
of the Mid-19 th Century: A New Canadian Wholesale Price Index
1
Donald G. Paterson & Ronald A. Shearer
Department of Economics,
University of British Columbia
July, 2001
Abstract: This study presents a new wholesale price index for Canada of the period 1840 – 1871.
The index is monthly. With this indicator we describe the fluctuations in the Canadian macroeconomy
and compare those with fluctuations in similar indexes from the United States and Britain. Canadian
prices move through several distinct phases in this period. These include: the rise in prices in the
1840s and the subsequent decline in the depression of 1848/9; the great Victorian economic boom
of mid-century culminating in the depression of 1857; the periods of the US Civil War inflation and
the apparent insulation of Canadian prices by the creation of a flexible exchange rate regime due to
the US withdrawl from gold; and the non-inflationary period of the boom following Confederation.
After adjustment for the US greenback issue, there is a broad coherence of the various indexes of
Canada, the US and Britain that suggests highly integrated commodity markets.
th
Keywords: Canada, 19 century, prices, wholesale price index, macroeconomic fluctuations, market
integration, inflation, depression, United States, Britain.
JEL Codes: N20, N21, E31
1
We wish to thank the research assistants who have worked with us over the years and our colleagues of
the Economic History workshop at the University of British Columbia. Specific comments by W. Erwin
Diewert, Angela Redish and Jan Tore Klovland were most helpful. We would also like to thank Louis P.
Cain for helpful assistance. Participants at the World Congress of Cliometrics, Montreal, July, 2000 offered
useful criticisms and constructive suggestions including: Michael Bordo, Trevor J. O. Dick, Marilyn Gerriets,
Alan Green, Christopher Hanes, Frank Lewis, Marvin McInnis and Bernard Papillon. Financial aid from the
SSHRCC and UBC Small Grants funded much of this work.
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 1
Price Levels in Canada and the North Atlantic Economy of the Mid-19th
Century: A New Canadian Wholesale Price Index
1. Introduction
th
There is little quantitative documentation of the macro-economy of Canada in the mid-19 century.
We previously reported estimates of the money supply in the period 1840–1871 that suggest it was a period
of remarkably high long-term aggregate income growth punctuated by severe instability [Paterson and
Shearer (1992)]. This paper takes the next step in filling the documentation gap by presenting a new price
index for Canada of this period. By comparing the Canadian price index with those of the United States and
Britain we identify periods in which the Canadian price level moved in harmony with those of major trading
partners and periods of considerable disparity. Despite episodes of apparent disparity in price level
movements we argue that the new wholesale price index provides evidence of the integration of Canadian
markets for tradable goods with those of the North Atlantic economy. The paper also identifies major
external price shocks that were transmitted to the small, open Canadian economy. In this paper “Canada” is
defined in its pre-Confederation sense of the British “Province of Canada,” essentially the southern parts of
modern Ontario and Quebec.
2
There has been some research on pre-1870 Canadian prices. Ouelette and Hamelin reported long
annual series of agricultural prices for urban and rural Quebec, from 1760 to 1850 [Ouelette and Hamelin
(1982)]. For the period 1843-1867 William Horovitz collected September prices for 21 agricultural
commodities from Montreal farmers’ markets [Horovitz (1967)]. Michell compiled prices from Toronto
farmers’ markets for 32 agricultural commodities from 1848 to 1868 and for 70 general commodity prices
from newspaper sources for 1868 to 1890 [Michell (1931)]. These were used to construct unweighted price
indexes (geometric means): an annual index of 15 agricultural prices from 1848 to 1868, a monthly index of
35 commodity prices from 1869-1918 and an annual index of 70 commodities from 1868-1925. Despite its
th
narrow coverage, the Michell 15 commodity index is the standard price index for Canada in the mid-19
century. It has been used, for example by Lewis and Urquhart in their recent paper on the standard of living
in Upper Canada and by Officer and Smith in their analysis of the effects of the Reciprocity Treaty of 18541866 [Lacey (1965, 1983); Lewis (1999); Officer (1968)]. Recently Paquet and Wallot [Paquet and Wallot
(1998)] have produced two very useful long annual prices indexes for Montreal and Quebec City. These are
unweighted thirteen-year moving annual averages.
The new wholesale price index differs from prior research in several respects. First, it is much
broader in scope than other indexes for the same period. Drawing on wholesale prices reported in
contemporary Montreal newspapers, it includes a wide array of manufactured goods of both domestic and
foreign origin. Montreal was the commercial and financial centre of Canada and for general trade, the most
2
The Province of Canada was created by the Act of Union in 1840 (proclaimed in 1841) that joined the two
British North American colonies of Lower Canada and Upper Canada, although culturally and for some legal
and administrative purposes the old distinction remained in place. In 1867 Canada joined with two other
colonies, Nova Scotia and New Brunswick, to form the new country, the Dominion of Canada. The
confederation was extended in 1871 to include British Columbia, Prince Edward Island and Manitoba.
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 2
important port at this period. Second, we extend the price analysis back to 1840 albeit with diminished
coverage of commodities and observations. Third, the new price index is weighted. Last, it is monthly.
Given Montreal’s strategic position in the Canadian economy and in the flow of Canadian trade and the
increasingly effective possibilities for commodity arbitrage among internal markets we take the new index as
representative of wholesale prices in urban Canada, 1840-1871. Furthermore, in the absence of a basis for
computing a more comprehensive index using a more sophisticated weighting system we argue that the new
wholesale price index is the best available index of the Canadian commodity price level in this period. In the
absence of data on the prices of services it is impossible to construct a comprehensive index of the price
level.
2. The Markets and the Price Data
Prices from two levels of markets were reported in Montreal newspapers of this period. Horovitz, and
Ouelette and Hamlin used prices reported for farmers’ markets, large market halls, managed by the city with
stalls for local farmers, butchers and fish merchants.
3
These markets provided local produce for local
consumption on standard market days, servicing both consumers and local grocers. In contrast, the
commercial wholesale market was a small network of commodity brokers and commission merchants
standing as intermediaries between local producers of export goods and foreign buyers on the one hand and
foreign suppliers of import goods and domestic buyers on the other. The wholesale market included a much
wider array of commodities than did the farmers’ markets. Wholesale prices were reported in periodic
circulars for the advice of clients at home and abroad and were also published in local newspapers under
various headings but most commonly as “Wholesale Prices Current.”
4
The format had wide international
usage at this time. Timber prices were separately reported for the export market by the firm Forsyth and
Bell. These were posted prices for Quebec City. We have used them to represent Montreal prices of lumber
for which we have no direct observations.
Explorations of the data for the 1840s show that prices for similar commodities in the wholesale and
farmers' markets followed broadly similar paths over time but the correlation is weak suggesting limited
trading between the markets. Deficiencies in the data render precise statements about the relative
behaviour of the two sets of markets problematic but prices in the farmers’ markets appear to have been less
flexible and less prone to extreme fluctuations than those in the wholesale market. It is possible that the
small scale of the transactions in the farmers' markets rendered them partially immune from seizure by
speculators during the frenzied speculative episodes. However, the relative independence of prices in the
two markets must have been rooted in significant differences in the quality of the products traded even
though their labels were the same.
3
There were two farmers' markets in Montreal. St. Ann's market was in the port and Bonsecours market
served the eastern parts of the city. For a description see Bosworth (1839) and Sandham (1870). Michell’s
prices for his pre-1868 indexes appear to have been from similar markets Toronto.
4
See Appendix A for information sources.
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 3
The price data used in this study are the low prices reported in the wholesale commodity market for
the third Thursday of each month, or the quotation for the nearest available day for which we have a report.
Prior to the currency reform of 1858 wholesale prices were reported in pounds currency (£1cy. = $4.00),
subsequently in dollars. Timber prices were reported in pounds sterling (£1=$4.867) throughout. In
constructing the index we expressed all prices in a common currency, the Canadian dollar converted at the
official exchange rates. Some weights and measures changed during the period and appropriate
adjustments have been made to the prices. The range of commodities for which there is detailed and
consistent price information varied over the period (Appendix A).
3. A Canadian Wholesale Price Index
Weights. The problem of weights for a Canadian price index is perplexing, as there are no detailed
aggregate consumption or production statistics for Canada, 1840-1871, to provide guidance. With some
reluctance, our starting point in developing the index is the weights from the widely cited Warren-Pearson
wholesale price index for the United States for broad categories of goods [Warren and Pearson (1933), p.
13]. For detailed commodity weights we have used the recent Hanes extension of Warren-Pearson [Hanes
(1998)]. Quite apart from the fact that they are for the United States rather than Canada, the WarrenPearson weights are less than satisfactory. Their starting point was the 1890 weights developed for the US
Bureau of Labor Statistics wholesale price index. These weights were based on judgements about the
relative importance of commodities in the general trade of the United States [US (1925)]. Warren and
Pearson made similar judgements for 1789 then made a linear interpolation to produce variable weights for
the years in between.
5
The weights that this interpolation implies for 1855, the mid-point of our period are
used as the basic weights of the Canadian wholesale price index. Despite the arbitrary nature of the weights,
6
the Warren-Pearson index has been widely used as a wholesale price index for the US. If the index is
suitable for this purpose, and particularly if it can be used to reflect the price history of upper New York state,
we believe that its weights can be applied to Canada at that time. In any case, experimentation shows that
minor changes in weights do not alter the story told by the new price index.
The Warren-Pearson index includes 11 major commodity groups. We do not have Canadian prices
for all eleven groups and have adjusted the weights accordingly. Canadian prices for textiles and clothing
and house furnishings are not available for any part of the period. At the most there are prices for 9 of the 11
groups and for some years in the 1850s, when there is a particular data gap, fewer. For these years the
index is possibly less reflective of the true movement of the price level than for the other years. However,
experimentation shows that when the less comprehensive indexes are extended through the 1860s they
track the more comprehensive index using the 1860 weights quite closely. Within each commodity group the
individual commodities for which there are prices varies over time and frequently differs slightly from those
5
The primary difference was in the weight assigned to farm products, 35 in 1879 vs. 25 in 1889. The
offsetting changes were spread among several categories, particularly fuel and light and metals (from 4 to 10
in each case) [Warren (1933), p. 13].
6
Warren-Pearson prices are reported to have come primarily from New York City [US (1925)],
Canadian Wholesale Price Index Paterson & Shearer June, 2001
included in the Warren-Pearson index, requiring appropriate adjustments in the sub-category weights.
Page 4
7
As a
result, the new wholesale price index is actually a series of linked indexes, each for a shorter period. The
Warren-Pearson major category weights for 1855 and the corresponding weights used here for various subperiods are shown in Table 1.
8
The average for the year 1860 is the base. All other indexes used in this
paper are also converted to an 1860 base.
Table 1. Major Category Weights
Warren
& Pearson
This Study
1855
1840-49
1850-55*
1855*-57
1858-59
1860-71
Farm Products
28.78
32.06
44.59
41.16
36.36
29.07
Processed Foodstuff
25.75
28.70
39.91
36.84
32.53
26.01
Leather Products
4.38
4.88
0.00
0.00
0.00
4.42
Fuel & Light
7.73
8.62
0.00
0.00
0.00
7.81
Metal Products
7.73
8.62
0.00
0.00
0.00
7.81
10.00
11.14
15.50
14.30
12.63
10.10
Drugs & Chemicals
0.81
0.90
0.00
1.16
1.02
0.82
Alcohol (Spirits)
3.76
4.18
0.00
5.37
4.75
3.80
Miscellaneous
0.81
0.90
0.00
1.16
1.02
0.82
Textiles and Clothing
9.24
0.00
0.00
0.00
11.67
9.33
House Furnishings
1.00
0.00
0.00
0.00
0.00
0.00
99.99
100.00
100.00
99.99
100.00
100.00
Building Materials
Total
* Weights change in June 1855.
Perhaps the most important gap is the lack of Canadian prices for textiles, particularly for cotton and
woollen products.
9
To correct for this gap we sought prices in Canada’s main supplier of textiles in this
period, Britain. British monthly data are available for prices of raw cotton but data for the 1840s showed that
prices of raw cotton fluctuated much more widely than prices of cotton manufactures and in this period
Canada did not import significant amounts of raw cotton. For part of the period, from January 1858 onward,
7
For instance, in the food products category the beef entry is exactly the same as the Warren-Pearson
commodity: the price of salt beef (mess) in barrels. On the other hand, for Canada we do not have separate
prices for hams, mess salt pork and prime salt pork and use the price of Canadian mess salt pork to cover all
three. In practice, given the overall importance of agricultural commodities and processed foodstuffs to the
index, minor variation in the weights does not produce significant differences in the overall pattern.
8
Sub category weights are in Appendix A.
The domestic manufacture of textiles (excluding clothing) accounted for 4.5% of the Gross Value of Product
of all Canadian manufacturing in 1870 – post-Confederation definition. Urquhart (1993), pp. 242-3. This
required substantial imports of cotton, woollen and linen cloth and yarn.
9
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 5
the British price of linen yarn is available. Although linen directly accounted for a small portion of Canadian
imports of textiles there is some qualitative evidence that the price of linen products fluctuated in sympathy
with the prices of cotton and woollen goods, which were, to some degree, substitutes. Thus, for example,
nd
the Belfast Linen Trade Circular (22
Oct, 1867) noted that
The ‘cotton famine’ has now forced many to use linen who previously used cotton; and
these, I hope we have secured as permanent customers for our linen manufactures.
Furthermore, on an annual basis, movements of the British price of linen yarn match almost exactly, the unit
value of Canadian imports of raw wool. Thus while the price of cotton goods would be desirable the use of
the price of linen as a proxy seems reasonable.
10
11
The Canadian Wholesale Price Index.
The wholesale price index for Canada, 1840 - 1871, is
presented in Figure 1. The index stands about 12 per cent higher in 1871 than in 1840 suggesting a modest
long run average rate of inflation during a prolonged period that included bursts of rapid economic growth.
However, that inflation rate was not stable. The most striking feature of the behaviour of the Canadian
wholesale prices is not their general upward drift but their extreme volatility by present day standards. Not
surprisingly, the fluctuations of the price level are generally coincident with deviations from trend in the
money supply. The new wholesale price index also covers the period of the reorientation of the Canadian
economy from extreme dependence on Britain to virtual integration with the US in the 1850s.The price level
movements etch out pronounced cycles, the dominant episodes of which are:
•
the economic boom of the mid-1840s which is followed by severe depression;
•
wild price fluctuations during the great Victorian boom and bust of the 1850s;
•
the disturbances brought about in the first half of the 1860s by the spill-over effects of the
US Civil War; and
•
The non-inflationary economic boom of the late 1860s which was also marked by short-run
price instability.
These four episodes are examined in section 5.
10
The inclusion of the price of linen as a proxy for textile prices causes very little change to the wholesale
price index for most of the period. The exception is a few months late in the war period and in its immediate
aftermath when it raises the index about 4 to 5 %.
A high proportion of all textiles imported came from Britain. Of imported cotton textile goods 90% were from
Britain in 1860 and varied little over the period. Similarly most wool cloth and woollen goods also came from
Britain. Together these two classes made up 82.9 % of all clothing and textile goods imported. Linen
accounted for most of the remainder of approximately 17.1% which was also mainly from Britain. Canada
(various years) Trade and Navigation Reports.
11
See Appendix B for estimates.
Index, 1860 = 100
60
80
100
120
140
160
40
42
44
46
48
Light graph lines
1840 - 49 are
interpolations
50
52
54
56
58
60
62
64
66
68
70
Vertical lines are
changes of weights
Figure 1. Canadian Wholesale Price Index, Monthly, 1840 - 1871.
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 7
4. International Channels for the Flow of Price Information.
Canada was a small open economy on a metallic monetary standard. It was a price taker in world
markets both for export goods and for import goods, so fluctuations in the price levels of trading partners
were transmitted to Canada through international trade. In this important sense Canadian markets were
integrated with others of the North Atlantic economy [Paterson and Shearer (2001a) and Lower (1993)].
Markets respond to news: the flow of information about commodity prices. Basic to the setting of
wholesale prices in Montreal was the transmission of information from central markets to peripheral ones
such as those of Canada. At the beginning of the period, the responsiveness of Canadian markets to US
and, particularly, British markets were sluggish because of the time required for the flow of information.
Canada’s export and import trade was predominantly with Great Britain and that trade was carried in sailing
vessels. However, the development of the ocean-going steamship had separated the flow of information
from the flow of goods. Fast steamer to Boston or New York sent important information, perhaps in 11-14
days plus the variable time between the event being reported and the mail steamer’s departure. The
information was then carried overland, by express routes, to Montreal, perhaps an additional 2-4 days. In
the summer steamers were fortnightly in the winter, monthly. The time elapsed in the flow of market
information in the mid 1840s can be inferred by comparing the dates at which price information was
published in Montreal and the dates that it left Liverpool.
12
During the shipping season the average lag was
about 19 days, in the winter it would have been much longer. For this reason, in the early 1840s we expect
Canadian prices adjustments to lag behind the British prices during the shipping season in the
neighbourhood of two to three weeks, a lag that is difficult to observe systematically in monthly data but
which would have given Canadian markets a small measure of independence.
13
The situation changed in the late 1840s as railways crept inland from Atlantic ports and southward
from Montreal gradually shortening the distance for mail and express shipments by slower, older overland
methods. More importantly, the telegraph reached Montreal by way of Buffalo and Toronto in early August
1847. Thus, by late 1847 the transmission of valuable commercial information such as the changes in prices
was virtually instantaneous between the Atlantic coast and Montreal. There was now a communications
basis for a high degree of integration of Montreal markets with corresponding American ones although still
formidable barriers in British, Canadian and US trade policies. The frequency of mail steamers from Great
Britain increased, particularly as competitive shipping lines emerged, reducing the trans-Atlantic information
lag. Finally, in 1866 the Atlantic cable was successfully laid. Then there was a virtually instantaneous flow of
valuable commercial information from Britain to Canada; Canadian markets should then have been more
closely integrated with British ones.
12
This information is from various Montreal and British newspapers. Private information would presumably
have reached Montreal merchants somewhat more quickly.
13
In the wheat and flour markets we can observe the lag very clearly in data of higher frequency. See
[Paterson & Shearer (2001a)].
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 8
5. The Canadian Price Level, 1840 - 1871
In this section we review four significant episodes in Canadian price history of this period. In doing so
we compare the Canadian wholesale price index with those of the US and Britain. Too much attention should
not be given to small variations in the relative price movements given the imperfections in all three series.
The1840s. Two propositions have been advanced about the 1840s in Canada, both of which we
have challenged elsewhere [Paterson & Shearer (2001a)]. One is that the Montreal price of wheat was
determined in Canada, not in Britain [McInnis, (1992), pp. 26-36]. The other is that the depression of the late
1840s was not a severe commercial depression but a short-term transition fuelled by a pessimistic
psychology generated by the repeal of the Corn Laws [Norrie and Owram (1991), p.213]. We do not propose
to elaborate on these arguments here but rather draw attention to the wild swings in the Canadian price level
in this period, swings that our analysis suggests were induced by fluctuations in British prices. These swings
were particularly pronounced in agricultural prices. In order to make the relevant comparison the WarrenPearson price index for the United States and the Klovland-Sauerbeck index are taken as representative of
American and British prices.
14
Klovland has recently gone back to the original sources and recalculated the
Sauerbeck index to provide monthly observations [Klovland (1993)].
The economic expansion of the mid-1840s is much commented on in the historical literature. The
remarkable British market in railway shares, railway expansion in Britain and the United States and the
dramatic rise in food prices consequent on the Irish potato famine and European grain crop failures fuelled
economic activity on both sides of the Atlantic. What is less well appreciated, especially in the Canadian
case, is the depth of the depression that preceded and followed it.
Created in 1841, the Province of Canada began life with an almost stagnant economy and a
continuing slump in prices that was not reversed until 1843. As a reflection of the depression, the wholesale
price index fell from about 100 in January 1840 to 71 in late 1843 (Figure 2). The drop in agricultural prices
was even more severe, from 106 to 64 over the same 35-month period. As we shall see, the tyranny of
th
volatile agricultural prices over the price level was a characteristic of Canada’s mid 19 century price history.
An intense boom followed on both sides of the Atlantic. However, unlike the economic expansions in
Great Britain and the United States, Canada’s boom of the mid-1840s was not widely based. Domestic
canal building, funded by the so-called Sydenham loan, did raise public works expenditures sharply in the
years 1842 to 1844 but the spending then petered out. Attempts to finance Canadian railway construction in
the years 1844-1846 were a notable failure and a broad construction boom did not occur. Rather, the
Canadian boom at this time was essentially an agricultural market phenomenon with some resonance in the
timber market. Moreover, the ragged up and downs of the Canadian wholesale price index in the mid-1840s
is a direct product of the wild gyrations of the British breadstuffs market. Figure 3 compares the Montreal
14
The Klovland-Sauerbeck wholesale price index closely corresponds to a new Liverpool wholesale price
index. For details see Paterson and Shearer (2001b). Three British price indexes cover all or part of the
period 1840-1871. The Gayer-Schwartz-Rostow index terminates in 1850 and so is of little assistance [Gayer
et.al. (1953) ]. The Sauerbeck index extends from 1846 onward and the Rousseaux price index covers the
entire period 1840–1871 [Mitchell (1962)]. The Gayer-Schwartz-Rostow index is weighted but the latter two
are not. All are annual indexes.
Index, 1860 = 100
60
70
80
90
100
110
120
40
41
42
43
44
45
46
47
Overall
Wholesale
Price Index
Agricultural
Wholesale Price Index
(adjusted for gaps)
48
49
Figure 2. Agricultural and Overall Wholesale Prices,
Monthly, 1840 - 1849.
$ per Barrel
0
2
4
6
8
10
12
40
41
42
43
44
45
Montreal
Liverpool
46
47
48
49
Figure 3. The Price of Canadian Flour at Montreal and Liverpool,
Monthly, 1840 - 1849.
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 11
price of flour with the price of Canadian flour in Liverpool. The two series move in tandem, with four
successive peaks in 1844, 1845, 1846 and 1847 and deep intervening troughs. The prices of imported
manufactured goods were much less volatile, moderating the fluctuations in the wholesale price index
somewhat and producing corresponding swings in the terms of trade and hence in real income. The
collapse of the boom in 1847 was of devastating proportions with profound long-term implications for
Canadian economic policy and for the Canadian constitution. The money supply contracted for two
successive years, the prices of all exports declined sharply and wheat and flour prices reached their lowest
levels of mid-century - and the annexationist movement, initiated by the repeal of British preferential tariff
protection, gained powerful popular support.
The Great Victorian Boom and Bust. From the slow recovery from the depression of 1847/49 the
Canadian economy was soon catapulted into the great boom of the mid-1850s. In Britain the boom was
evident by late 1851 in the form of a building boom. This put upward pressure on Canada's timber prices
[Cooney, 257-69] but also on some key import prices such as those of iron and metals products. Although
hostilities in the Crimea did not begin until the spring of 1854, pre-war posturing interrupted the flow of grain
from Russia to Britain and in late 1853 Liverpool agricultural prices rose sharply. Given the importance of
agriculture and timber to Canada it is not surprising that the Canadian wholesale price index also took a
remarkable jump in late 1853. The result was another price-fuelled Canadian boom. However, this boom
was more broadly based than that of the mid-1840s because of the coincident building of the Grand Trunk
railway, up to that time the world’s longest railway project [Currie (1957)].
What is surprising about the comparative behaviour of price level during the great Victorian boom is
the divergent paths followed by prices in Britain and those in North America (Figure 4). British prices sagged
through 1854 and early 1855, whether measured by the Klovland-Sauerbeck or a special Liverpool price
15
index , whereas North American prices remained high until 1856. Canadian prices in particular seem to
soar, unconnected to those in Britain or the United States. Was this a real phenomenon or an aberration
resulting from the deficiencies of the Canadian wholesale price index for the years 1850-mid-1855? As seen
in Table 2 the bundle of goods is severely restricted giving excessive weight to agricultural prices. When the
broader commodity bundle is reintroduced the indexes again converge. One of the characteristics of the
1850s boom in all three North Atlantic economies is the three peaked nature of its last phase. The peaks
were separated in each country by substantial troughs of a relatively short duration, but beyond what is
normally considered the harvest cycle, rising to a final peak before the financial crisis of 1857. When the
crisis came in September of that year prices in all three economies plunged together into the subsequent
depression.
15
For other purposes we have computed a wholesale price index for the port of Liverpool – see Paterson
and Shearer (2001c). The agricultural component of this index is used later in Table 2. It is the geometirc
mean of ten agricultural goods prices including several types of grain and flour, some of Canadian origin.
60
80
100
120
140
160
50
51
52
53
US
54
55
British
56
57
Canadian
58
59
Figure 4. Canadian, US and British Prices, Monthly, 1850 - 1859.
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 13
The US Civil War Years. The most dramatic event in the price history of the North Atlantic economy
in this period was the American greenback inflation. Throughout the 1860s and 1870s Canada and Britain
were gold standard countries. The US Civil War began in April 1861 and quickly confronted the Union
government with serious financial requirements. A decision was taken to fund the war efforts largely by
borrowing (to shift part of the cost of the war to future generations) and part of that borrowing involved the
issuance of so called “greenbacks” as legal tender currency. The United States immediately suspended gold
convertibility, a suspension that lasted from January 1862 until January 1879. The issuance of inconvertible
greenbacks had two effects of importance to Canada. Within the US it produced a severe inflation.
Externally it placed the United States on a flexible exchange with her major trading partners. In Montreal the
price of the US dollar fell sharply reaching a depth of Cdn $.40 in mid-1864 (Figure 5).
One important consequence of the flexible exchange rate regime was the substantial insulation of
the Canadian price level from the greenback inflation - at least until the end of the war. Although the
American price level rose sharply from 1862 through 1864, the Canadian price level fell and despite a jump
in late 1863 was about the same level in 1865 as it had been in 1860. This is illustrated in Figure 6 which
compares the Canadian wholesale price index to US wholesale prices where the US index is converted to
Canadian dollars at the market exchange rate. For Canadians and Americans making decisions about
cross-border commodity trade it was exchange rate adjusted US prices that were relevant. Failure to
recognise this has led at least one pair of economists astray. In their classic reassessment of the Reciprocity
Treaty of 1854 which established free trade between the US and Canada in natural resources and
agricultural goods, Officer and Smith conclude that in the absence of free trade the differential rate of
inflation “… would have been sufficient to overcome any reasonable tariff” [Officer and Smith (1968)]. This
ignores the associated devaluation of the American dollar. With the appropriate exchange rate adjustment
Canadian and US prices follow broadly similar paths during the US Civil War period; contrary to Officer and
Smith relative inflation in the US cannot be used to explain the trade flows of these years. Indeed, this
episode is interesting historical evidence of the potential insulating properties of a flexible exchange rate for a
small, open economy.
When looked at more closely, however, the relative behaviour of Canadian, American and, we might
add, British price indexes in the early 1860s was unusual. First, in 1860 and early 1861 wholesale prices in
all three countries declined slowly and in close concert. Second, following the outbreak of war in April 1861
the close coherence disappeared. After an initial jump in all three series, the Canadian price index resumed
its steady decline until mid-1863; the British price index jumped to a considerably higher level about which it
fluctuated for the duration of the period; and the US price index (adjusted for the exchange rate) was
extremely volatile. Were these relative movements real or a product of the imperfections of the indexes?
Canadian $ Price of US Bills
0.2
0.4
0.6
0.8
1.0
1.2
60
61
62
63
64
65
66
67
68
69
70
71
Figure 5. Canadian - US Exchange Rate, Monthly, 1860 - 1871.
Average of 1860 = 100
100
150
200
250
60
61
62
63
64
65
66
67
Canadian
US Exchange
Rate Adjusted
US
68
69
70
71
Figure 6. Canadian and US Nominal and
Exchange Rate Adjusted Prices, Monthly, 1860 - 1871.
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 16
Food and agricultural prices in both Britain and Canada continued their downward movement after
the outbreak of war in the US – see Table 2. The jump in the overall British index relative to that of Canada
was due to factors other than the prices in foodstuffs. The explanation appears to be due to the construction
of the Klovland-Sauerbeck index which uses raw input prices and not finished goods prices in the textile
category [Kovland (1993), p. 225]. Between August 1861 and August 1862 the price of raw cotton in
Liverpool more than doubled due to the sharp decline in raw cotton imports. The US price index uses
finished textile goods and the Canadian one a proxy for finished textile prices. As noted earlier, finished
textile product prices neither rose as early as the raw cotton price nor nearly to the same extent.
16
Not
surprisingly, the shift of the British index is due to the particular textile prices used.
With respect to US prices, the apparent volatility of the exchange rate adjusted index may be an
illusion, a product of the volatility of the foreign exchange market not sensitively reflected in wholesale prices.
However, even if we discount the apparent volatility of US prices, a widening gap appeared between
Canadian and American wholesale prices. It seems unlikely that Canadian and American commodity
brokers were unaware of possible profits from cross border arbitrage particularly in agricultural commodities,
or that is took them twelve or more months to react to them. Wartime conditions may have disrupted normal
marketing arrangements, including those governing cross-border trade. Was there an implicit or explicit trade
restriction at the border? While the international trade statistics of the period are confusing, they do not
support such an interpretation [Officer and Smith (1968), 600; Ankli (1971), 1 – 20].
The Canadian wholesale price index, as noted, drifted downward through the early 1860s led by the
agricultural goods prices. All commodities experienced a continuous price decline with only the exception
being that of building products, including timber, whose prices remained relatively constant. The fall in the
prices of agricultural goods in Liverpool accelerated to a trough in 1863/1864 when the index was 20 percent
below its 1860 level; Canadian agricultural prices similarly fell by 24 per cent. US farm and overall foodstuff
prices appear to remain high in the first eighteen months of the war (but not significantly cereal prices which
declined in parallel to those in Canada). By early in 1863 the Canadian agricultural prices had shaken loose
from their apparent attachment to still declining British agricultural prices and began to rise to be again in
rough correspondence with the exchange rate adjusted US prices.
16
On a yearly basis US textile goods prices, adjusted for the exchange rate, were approximately the same
until 1863 when they rose 20%. They actually declined in 1864. The significant rise was not registered until
1865 [Warren and Pearson, pp. 26-27, 32-33].
Average of 1860 = 100
60
80
100
120
140
160
60
61
62
63
64
65
US Exchange
Rate Adjusted
66
67
British
Canadian
68
69
70
71
Figure 7. Canadian, US and British Prices, Monthly, 1860 - 1871.
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 18
TABLE 2. AGRICULTURAL GOODS P RICE INDEXES , A NNUALLY, 1860 - 1871.
Warren-Pearson
This Study
USA
Liverpool
Canada
exchange rate adjusted
1860
1861
1862
1863
1864
1865
1866
1867
1868
1869
1870
1871
100
98
101
102
108
126
131
126
130
126
128
120
100
98
90
79
79
83
95
107
106
95
90
99
100
93
84
76
94
110
133
129
129
120
123
121
Notes: US prices are exchange rate adjusted.
The Liverpool wholesale agricultural price index is the geometric average Liverpool price of nine commodities: Canadian
and US salted beef and pork; Argentinean leather; US tobacco leaf; domestic oats and wheat (red); and Canadian wheat
(spring) and flour (extra-superfine).
Source: Warren-Pearson (1933), pp.26-7 and Paterson and Shearer (2001c).
One great price anomaly of the early 1860s did, however, occur in the agricultural sector. A
succession of small British wheat harvests kept British grain prices high in 1860 - 1862 [Lawes and Gilbert
(1893)]. Canadian and US merchants responded. US exports of wheat and flour to the Britain of 160
thousand hundredweight in 1859 and 6.497 million in 1860 to 16.150 million in 1862, a surprising reaction of
a country entering a full-scale war. [US (1976) p. 899]. Canadian gross and net exports of wheat reached a
high comparable to that of the 1850s boom but only for two years [Canada, Reports of Trade and Navigation
(various years)]. The Montreal Board of Trade (1860-63) indicates that by 1863 the export of grain and flour
through the port was about 13 per cent of North America's total, straining the port to capacity. (Before the
war Montreal typically handled less than 9 per cent of continental exports). American breadstuffs were being
shipped to Europe by way of Canada. The Union was of course denied the use of the Mississippi forcing
other routes to be exploited more than in the past.
17
Despite the rise in the British price of wheat and flour
and despite the North American response of increased shipments North American breadstuff prices did not
rise to nearly the same degree. In fact, the price gap between Chicago and Montreal spring wheat, on one
17
This raises the interesting possibility that in the early war years the US was somehow dumping wheat to
gather foreign exchange. Adding to the confusion American trade statistics show a dramatic increase of
wheat imports from British North America, from 1.24 million bushels in 1859 to 4.63 million bushels in 1861
and 3.22 million in 1862 [US (1894) p. 1497]. This presumably represented wheat and flour in transit to
Britain. Note that British North America includes the Atlantic colonies as well as Canada although Canada
was the major wheat growing and exporting region.
Canadian Wholesale Price Index Paterson & Shearer June, 2001
hand, and London and Liverpool wheat, on the other, was greater than at any other time in this mid-19
century period.
Page 19
th
18
The relative behaviour of the price indexes of Canada, the US and Britain in the closing stages of the
US Civil War is also interesting. Over fifty months from February 1863 wholesale prices rose from 78.9 to
114.1 - a rate of change unprecedented except by that of the 1850s. When the US price index jumped to
242 in August 1864 the exchange rate adjusted sensitively, keeping the exchange rate adjusted index
reasonably stable. The exchange rate appears to have been determined by the relative behaviour of price
levels. However, the subsequent recovery of the American dollar from Cdn. $.462 in January 1865 to Cdn.
$.755 in May was not accompanied by an equally sharp drop in the price level. Apparently the recovery of
the exchange rate change was “spontaneous,” induced by factors other than the price level. In any case,
exchange rate adjusted US prices rose sharply relative to Canadian and particularly British prices. While
British prices remained at a very much lower level, the Canadian index eventually made a partial adjustment
to the new American level. In contrast to the early stages of the US Civil War period Canada in the late
stages experienced a sharp inflation. If we abstract from these dramatic changes in the relative levels of the
three price indexes in 1865/66, they subsequently track each other rather closely.
19
It is the relative
adjustment in levels that begs for an explanation.
Part of the explanation may rest in changes in US taxation and particularly the taxation of imports.
Import duties, the traditional method of raising tax revenue, were increased at the beginning of the war and
on several subsequent occasions. Internal taxation was introduced in a major tax bill on July1, 1862. It
involved a broad range of taxes, most of them in the nature of excise taxes, some specific duties, and some
ad valorum tariffs [United States (1976), pp. 1067 - 1150]. Apparently initial enforcement was lax.
Subsequently revisions were made to the tax structure, including a major bill in 1864, and of critical
importance administration of the tax system improved. Revenues went up accordingly, reaching a peak in
1866. This amounted to an increase from approximately $40 million in 1861 to about $90 million in 1866.
While we do not attempt to estimate the effect of these new taxes on commodity prices, and particularly on
the Warren-Pearson wholesale price index, a crude indicator of the magnitude of the increase of a major
portion of the taxes is customs duty revenue as a percentage of the value of commodity imports. The
increase from 1861 to 1868 is dramatic going from approximately 13 to 46 per cent. The tax rates applied to
domestic production were not as draconian but more comprehensives. Both the customs duties and the
internal taxes would have raised the price level in the US relative to both Canada and Britain. For the most
part the new US taxes were outside the agricultural sector. In agricultural goods the US and Canadian
wholesale prices are in rough accord after about 1863 (see Table 2).
18
The contemporary statistician, William Elder of the US Treasury, made the argument that there was a
continuing incentive to export wheat even when the sterling price declined after 1863. This arose because of
the receipt of gold equivalents, dependant on the rate of exchange, and the ability to pay-off debt
denominated in US dollars that had been contracted before the greenback issue [United States (1865), p.60].
19
If the indexes are recalculated so that 1871=100, the correspondence from 1866 on is close. If we ignore
the 1865 discordance of levels, and again allowing for the undoubted deficiencies of all three indexes, the
evidence is strong that commodity arbitrage was working well.
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 20
For Canada a second change in US policy was also important: the abrogation of the Reciprocity
Treaty in 1866. Canada’s major exports that had previously entered the US duty free now faced a stiff tariff.
This should have depressed Canadian prices and perhaps increased American prices. The abrogation of the
Reciprocity Treaty also appears to have had real macroeconomic effects. The Canadian money supply (our
best indicator of aggregate economic performance) suggests that the Canadian economy stalled somewhat
in 1866 following repeal of the agreement and that this coincided with the peak in Canadian wholesale
prices. Of course 1866 was no normal year in other respects with the collapse of cotton prices and the
financial crisis in May associated with the Prussian-Austrian war. This financial crisis was one in which
Canada and the US were not substantially involved [Kindleberger, p.131-2]. The month of the crisis was,
coincidentally, the peak of the post US Civil War rise in prices in both the US and Canada. The aftermath
was a secular decline in wholesale prices in both countries that lasted for the rest of the decade.
The Confederation Boom and Beyond. By the beginning of 1868 the Canadian economy had not
only recovered from lacklustre performance in 1866 began to exhibit accelerated growth, a boom that was to
last for the remainder of the period and beyond, until about 1873/4. Growth of the monetary aggregate in the
years from 1868 to 1871 was respectively: 6.0%, 16.1%, 30.6% and 19.4%. Similar movements are
apparent in many other indicators such as railway freight and passenger revenues.
20
This expansionary
episode, named here the Confederation boom, altogether rivals the booms of the earlier years except in the
behaviour of prices. It was a boom that began in years of deflation and the continued but slow general
downward trend in prices marked its first two years. The trough of the decline was reached in early 1870 that
was immediately followed by a sharp increase in the wholesale price index. This sharp increase was
exclusively a result of a rapid rise in food prices and building materials in the spring. This was followed early
in the next year by a fairly substantial fall and subsequent rise in food prices dragging the index through a
substantial gyration. But building product prices, in a similar fashion to the 1850s boom, rose and remained
high. Overall prices at the end of 1871 were approximate the same as those established in 1870. Thus
throughout the period of substantial economic growth to 1871 wholesale prices are characterised by fairly
erratic fluctuations at the monthly level although by the end of the period, December 1871, were about equal
to those at the end of the US Civil War period. Although US prices in the later years of this period were now
at a different level to the Canadian ones the pattern of their variation was very similar.
An obvious question, of course, is how well the new wholesale price index fits with the available price
information that begins in the late years of our period and that continues onward. There are two general price
indexes available, both annual:
21
20
Total operating revenues for the Grand Trunk and Great Western Railways in 1868 and the next three
years were, in millions: $9.6, 10.3, 11.1 and 12.8.
21
The third index of Michell’s 70 commodity prices of (mainly) Toronto prices from 1867/8 using 70
commodity prices is more concentrated in agricultural commodities and covers fewer commodities in general
than the DBS series and is not considered here. Nonetheless, it should be noted that the Michell annual
price index using 32 commodities for the period 1848 - 1868 captures the main contours of the annualized
Canadian Wholesale Price Index Paterson & Shearer June, 2001
•
Page 21
The Dominion Bureau of Statistics Wholesale Price Index from 1868 using 89 commodity prices;
and
•
The Implicit Price Index (Deflator) of the Urquhart National Accounts projects from 1870.
The later data cannot provide a direct test of the new monthly wholesale price index. However, we
can make a crude test of the appropriateness of our weights. In Figure 8 we present both the DBS
wholesale price index (a geometric mean of the commodity group price relatives) and that index recalculated
by applying our weights to the commodity group price relatives of the DBS series. The now weighted
arithmetic average DBS wholesale price index tracks the movements of the original DBS series closely. This
is perhaps not surprising given the importance of agricultural and processed agricultural goods prices in
both. However, the re-weighted wholesale price index also mirrors the Urquhart GDP price deflator closely
[Urquhart (1993)].
22
Without passing judgement on the appropriateness of our weights, we can at least
conclude that in the post 1870 period they are no worse that the weights in existing indexes.
6. Conclusions
In this paper we have presented a new wholesale price index for Canada, 1840-1871. We are
acutely aware of its defects. The weighting system that is somewhat arbitrary, for part of the period the
available price data are seriously incomplete, and a simple fixed-weight index was all that the evidence
allows. Sophisticated techniques of index number construction cannot be employed given the available data.
Nonetheless, we believe that the index is a significant improvement over what has been available heretofore.
Several points stand out from our review of the price history of Canada using this index and we have
suggested a few unresolved puzzles. First, the Canadian price level was extremely volatile. The greatest
variability was in prices of agricultural goods, which were net exports, and the least in those of manufactured
or semi-manufactured goods, which were, in large measure, imports. As a result, Canada’s terms of trade
were also cyclically variable with corresponding implications for Canadian real income.
Second, under normal circumstances throughout the mid-century period, Canadian and American
prices moved in harmony with each other - a correspondence that could only be a product of highly
integrated markets. During the part of the US Civil War when the American price level and the exchange rate
fluctuated widely the correspondence broke down. Measured in their own currencies, Canadian and US
wholesale price levels moved independently of each other illustrating the potential insulating effects of a
flexible exchange rate for a small open economy. When adjusted for fluctuations in the flexible exchange
rate the disparity in behaviour is not as extreme but there are significant anomalies in the relative movements
version of the new wholesale price index presented here. For a technical description of the Michell and DBS
series see: Lacey (1965) pp. 281-284.
22
Urquhart's price deflator, described in pp. 6 - 7, is a cost-of-living index based on the DBS series noted
above, the Bertram - Percy modifications of the Department of Labour cost-of-living weights and some food,
fuel and light prices from Kingston, Ontario. No direct adjustment can be made to our price series using
Prices Indices, Various Bases
0
20
40
60
80
100
120
140
68
GDP Deflator
1870-1890
[1900=100]
DBS WPI
1868-1890
1935/9=100
DBS WPI *
Recalculated
[1935/9=100]
70
72
74
76
78
80
82
84
86
88
* DBS WPI is the DBS index recomputed from the commodity classification
series but using the weights of this study as shown in Table 2.
WPI
1840-1871
[1860=100]
90
Figure 8. Wholesale Price Indices, Annually, 1869 - 1890.
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 23
of Canadian and American price levels during the Civil War. We see both a moderate degree of
independence of Canadian prices in the opening years of the war and a much more dramatic shift in the level
of American prices in 1865/66 that was not mimicked in Canada or in Britain. Perhaps the lesson is the
obvious - in the unusual conditions of full-scale war many conventional propositions about market behaviour
do not hold. Both the US customs duties and the internal taxes would have raised the price level in the US
relative to both Canada and Britain. Adjust for levels they track each other closely from 1866-1871. We
interpret this as strong evidence that there was a relative change in the level of the American price index as
a result of taxation.
Finally, there is a close correspondence between the Canadian and British wholesale prices In one
major respect, however, the behaviour of the Canadian wholesale price index is different from that of the US
index. The Canadian index shows wider fluctuations - higher peaks and lower troughs. This is most
apparent: in the slide in prices to troughs in the late 1840s; at the peak of the mid-1850s boom; and in the
early US Civil War years, to 1863. It is possible that the greater variation in Canadian wholesale prices is a
statistical artefact - a result of the omission of some prices from the Canadian index that were less cyclically
sensitive than those of Canada’s major export products. However, apart from the early 1850s, the omitted
items had very little weight in the index in either country. With the possible exception of the peak of 1855, we
think that the extreme behaviour of Canadian prices is a real phenomenon, not a product of the construction
of our index. The explanation is not obvious: it is a task for further research.
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 24
Appendix A
Classification of the Monthly Wholesale Price Indexes.
The data that are used here are mostly wholesale prices taken from the 'Wholesale Prices Current'
reporting. With only a few exceptions they are from Montreal. Some date as continuous series from 1840, but
others from 1850, 1855 and 1860. It is not clear why the fragmentary reporting suddenly becomes
continuous or why there are some breaks in reporting. The months from January 1850 to May 1855 are a
particular problem. New techniques in printing and the newspaper industry also facilitated the use of
templates and tabular material.
For weights within a category we use the weights presented by Hanes - these are adaptations of the
weights used by Warren and Pearson in their pioneering studies of US wholesale prices. The original
Warren-Pearson weights varied from year to year but are in practice fixed from 1860 onward. In many cases
we can match the individual commodities and where this is not possible we use close substitutes. For
instance, in the Food Products Index the beef entry is the same: the price of salt beef (mess) in barrels. On
the other hand, for Canada we do not have separate prices for hams, mess salt pork and prime salt pork and
use the price of Canadian mess salt pork to cover all three. In the lists below, where weights have been
grouped the original Hanes-Warren-Pearson (HWP) weights are shown in brackets. The weights that are
shown below may total to less than 100 if full coverage cannot be achieved. In these cases the index is
computed by scaling all the weights proportionately.
Monthly Food Products Index (1840 - 1849). The following is based on the weights which are used in
Hanes (1998) "Consistent US Wholesale Price Series" and are modified Warren-Pearson weights:
Food Products
Beef
14.00
Pork
14.00
Butter/Fats
8.00
Tea
1.00
Coffee
3.00
Sugar
8.00
Molasses
1.00
Flour/Bread
22.50
Rice
Salt
Total
0.50
1.00
76.00
Commodity Prices
Salt beef, average of prime (mess) and prime in barrels
(Hams 4%; Mess 5%; Prime 5%) Salt pork (mess) in barrels
Fats
Tea, average of Twankey and Suchong
Coffee, South American or Rio
Sugar, Cuba bright - not always described
Montreal molasses (clayed)
(Bread 2.5%; Bread-Navy 2.5%; Cornmeal 3%; Flour 14.5%)
Superfine flour
Patna rice – not always described
Liverpool salt
Monthly Food Products Index (June 1850 – May 1855).
Food Products
Beef
14.00
Pork
14.00
Butter/Fats
8.00
Flour/Bread
22.50
Peas
Total
1.00
59.50
Commodity Prices
Salt beef, average of prime (mess) and prime in barrels
(Hams 4%; Mess 5%; Prime 5%) Salt pork (mess) in barrels
Fats, Butter
(Bread 2.5%; Bread-Navy 2.5%; Cornmeal 3%; Flour 14.5%)
Superfine flour
not always described
Monthly Food Products Index (June 1855 - 1871).
Food Products
Beef
14.00
Pork
14.00
Butter/Fats
8.00
Peas/beans
1.00
Tea
1.00
Coffee
3.00
Sugar
8.00
Commodity Prices
Salt beef (mess) in barrels
(Hams 4%; Mess 5%; Prime 5%) Salt pork (mess) in barrels
Butter
Peas
Tea (Twankey)
Coffee, South American or Rio
Sugar, Cuba bright
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Molasses
Flour/Bread
Rice
Fruit
Salt
Olive Oil
Spices
Total
1.00
22.5
Page 25
Montreal molasses (clayed)
(Bread 2.5%; Bread-Navy 2.5%; Cornmeal 3%; Flour 14.5%)
Superfine flour
Patna rice
Average price of Dried Muscatel raisins & Dried Currants
Stoved common salt
Olive Oil
pepper
0.50
3.90
1.00
0.10
0.20
78.20
We achieve a 78.2% coverage of the HWP commodities with the principal omissions being: Potatoes 6%;
Milk 3.4%; Fish 1%; Cheese 2%; Tallow 1%; Lard 5%; and Eggs 3%. The Food Products Index is
calculated for the period 1855 - 1871.
Spirits & Alcohol (1840-1849). This is the unweighted average of the indexes of the prices of:
Spirits
Beer
Total
25.00
25.00
25.00
75.00
Hennessey Brandy or Best Cognac - not always described
Jamaica rum
London porter at Montreal, per doz.,
Spirits & Alcohol (1850-May 1855). Not available.
Spirits & Alcohol (June 1855-1871). This is the unweighted average of the indexes of the prices of:
Spirits
Beer
25.00
25.00
25.00
25.00
Total
Hennessey Brandy
Jamaica rum
De Kuypers' or Holland gin
London porter at Montreal, per doz.,
100.00
The HWP uses a grain alcohol price.
Building Materials.
The prices of lumber here are the Quebec City posted prices from the Forsyth and Bell Circulars. All other
prices are from Montreal markets. The principal part of the building materials index is made up of wood.
Although certain key building commodities are not included here such as lime, cement, bricks and glass
(except in the period 1840 – 1849) and their absence accounts for only a 15% difference from the HWP
index. We would not expect the time pattern of the index to be very much different had these prices been
available.
Building Materials (1840-1849).
White Pine Boards
Oak Timber
Spruce Boards
Staves & Shingles
Paint
Linseed Oil
Turpentine
Nails
Glass
Total
32.00
13.00
5.00
26.00
4.00
2.00
0.40
2.00
3.00
87.00
White pine 24%; yellow pine 8%) Quebec City pine deals
(Oak timber 10%; oak headings 3%) Quebec City oak
Quebec City spruce deals
(Shingles 12%; staves 14%) Quebec City staves, "firsts"
paint, average of white & red lead
Best boiled linseed oil not always described
Turpentine [May 1844 to December 1848 only]
nails, average of common wire & 14lb. nails
Window glass, 6.5 X 7.5
Building Materials (1850-1871).
White Pine Boards
Oak Timber
Spruce Boards
Staves & Shingles
Total
32.00
13.00
5.00
26.00
76.00
White pine 24%; yellow pine 8%) Quebec City pine deals
(Oak timber 10%; oak headings 3%) Quebec City oak
Quebec City spruce deals
(Shingles 12%; staves 14%) Quebec City staves, "firsts"
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 26
Building Materials (June 1855-1860).
White Pine Boards
Oak Timber
Spruce Boards
Staves & Shingles
Red Lead paint
Putty
Linseed Oil
Total
32.00
13.00
5.00
26.00
4.00
0.10
2.00
82.10
White pine 24%; yellow pine 8%) Quebec City pine deals
(Oak timber 10%; oak headings 3%) Quebec City oak
Quebec City spruce deals
(Shingles 12%; staves 14%) Quebec City staves, "firsts"
Red lead paint
Putty
Best boiled linseed oil
Building Materials (1860-1871).
White Pine Boards
Oak Timber
Spruce Boards
Staves & Shingles
Red Lead paint
Putty
Linseed Oil
Tar
Turpentine
Nails
Total
32.00
13.00
5.00
26.00
4.00
0.10
2.00
0.50
0.40
2.00
85.00
White pine 24%; yellow pine 8%) Quebec City pine deals
(Oak timber 10%; oak headings 3%) Quebec City oak
Quebec City spruce deals
(Shingles 12%; staves 14%) Quebec City staves, "firsts"
Red lead paint
Putty
Best boiled linseed oil
Coal tar
Turpentine
Common wire nails
Excluded: cement 2%; (after 1849) glass 3%; bricks 5%; and lime 5%.
Drugs and Chemicals.
The US Hanes Warren-Pearson index for this commodity group uses five commonly produced and used
drug and chemicals prices with equal weight applied. We follow the same procedure with four or five such
goods as available. Two are the same as the HWP: Alum and sulphur. The HWP uses the prices of: blue
vitriol, copperas and indigo. Here we use: carbonate of soda and borax.
Drugs and Chemicals (1840-1849).
Alum
Borax
Carbonate of soda
Sulphur
Indigo
Total
20.00
20.00
20.00
20.00
20.00
100.00
Alum
Borax
Carbonate of soda
Sulphur flour
Drugs and Chemicals (1850- May 1855). Not available.
Drugs and Chemicals (June 1855-1871).
Alum
Borax
Carbonate of soda
Sulphur
Total
25.00
25.00
25.00
25.00
100.00
Alum
Borax
Carbonate of soda
Sulphur flour
Miscellaneous Commodities.
The HWP Miscellaneous Commodities Price Index for the US has five commodities that can be closely
duplicated in Canada. We have substituted the price of saltpetre for the unavailable gunpowder and borax for
th
soap. Borax was the universal cleaning agent of the 19 century (and later) and could be used in various
concentrations. Apart from various household cleaning uses borax was also used for personal hygiene. "It
allays the heat of sunburn, bleaches out tan and redness helps freckles and moth to a great degree"
[Jefferies and Nichols (1894) p.111]. We have no corresponding price to that of rubber.
Miscellaneous Commodities (1840-1849).
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Ashes, pearl
Saltpetre
Starch
Soap
Total
20.00
30.00
10.00
30.00
90.00
Ashes, pearl
(Gunpowder 30%) saltpetre
Glenfield starch - not always described
Imported
Miscellaneous Commodities (1850- May 1855). Not available.
Miscellaneous Commodities (June 1855-1871).
Ashes, pearl
Saltpetre
Starch
Borax
Total
20.00
30.00
10.00
30.00
90.00
Ashes, pearl
(Gunpowder 30%) saltpetre
Glenfield starch
(Soap 30%)
Excluded: rubber 10%.
Hides and Leather Goods (1840-1849).
Hides
Leather
Total
30.00
70.00
100.00
Green or fresh slaughter hides
Average of: leather, Sole No.1; calfskin leather; and patent leather
Hides and Leather Goods (1850-1859). Not available.
Hides and Leather Goods (1860-1871).
Hides
Leather
Total
30.00
70.00
100.00
Green or fresh slaughter hides
Average of: leather, Sole No.1; calfskin leather; and patent leather
Fuel and Lighting (1840-1849).
Coal, Bituminous
Candles
Oil
Total
50.00
3.00
2.00
55.00
Newcastle grate coal (occasionally described as 'Welsh')
candles, average of Belmont and common
whale oil, average of whale and sperm oil
Fuel and Lighting (1850-1859). Not available.
Fuel and Lighting (1860-1871).
Coal, Bituminous
Coal, anthracite
Candles
Oil
Total
50.00
34.00
3.00
2.00
89.00
Newcastle grate coal (occasionally described as 'Welsh')
Lehigh coal
Belmont candles
whale oil, often described as 'bleached'
Excluded: Petroleum 10% and Matches 1%.
Metals and Metal Products (1840-1849).
Pig Iron
Sheet Iron
Nails, Wire
Spring Steel
17.00
21.00
22.00
5.00
pig iron (Gartshire, No. 1)
sheet iron (best brands),
(Nails 10%; iron wire 5%; wood screws 5%; butts 2%)
cut nails (occasionally described as 'assorted')
(Shovels 5%) spring steel (best)
Page 27
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Tin
Lead*
Total
13.00
5.00
89.00
Page 28
(Tin, pig 5%; spelter 3%; zinc plate 5%) charcoal tin plate (IC)
lead, average of sheet & shot
* Added commodity.
Metals and Metal Products (1850-1859). Not available.
Metals and Metal Products (1860-1871).
Pig Iron
Sheet Iron
Nails, Wire
17.00
21.00
22.00
Spring Steel
Tin
Total
5.00
13.00
84.00
pig iron (Gartshire, No. 1)
sheet iron (best brands),
(Nails 10%; iron wire 5%; wood screws 5%; butts 2%)
cut nails (occasionally described as 'assorted')
(Shovels 5%) spring steel (best)
(Tin, pig 5%; spelter 3%; zinc plate 5%) charcoal tin plate (IC)
Excluded: Copper sheets and pigs 15%; and Quicksilver 1%.
Textiles and Clothing (1858 – 1871) – Proxy.
Textiles and textile products made up 16.0% of all imports by value in 1855 and 27.4% in 1865.
Linen imports were 4.3% and 5.1% of all textile imports in the same two years. Cotton textiles made up the
bulk of textile imports in 1855 (59.1%) but the second largest category in 1865 (33.2%). Woollen goods were
38.0% of all textile imports in 1855 but were the largest class in 1865 at 47.4%. As noted in the text there are
no useful textile prices for Canada of this period. Furthermore even in pursuit of a proxy for textile prices
there are few alternatives. The Liverpool price of raw cotton, which is available, is not a good indicator
because raw cotton prices tended to be more volatile than the price of finished textile goods. Here the proxy
is the simple average of the price of two popular weights of linen yarn. Although the prices are quoted at
Belfast they were essentially the Liverpool ones. Source: Belfast Linen Trade Circular, (1853 – 1871),
Belfast. The systematic reporting of prices did not begin until January 1858. The assumption is that linen
price movements matched the prices of near substitutes. This can be confirmed for woollen goods on an
annual basis. “Summary Statement of the Quantity and Value of Foreign Merchandise Entering for
Consumption …”, Sessional Papers, various years.
Linen Yarn
Linen Yarn
Total
50.00
50.00
Not Applicable
25 Lea, Linen Yarn, Weight 8lbs. per bundle, Medium and Prime Warp
50 Lea, Linen Yarn, Weight 8lbs. per bundle, Medium and Prime Warp
Not covered in the this index are 'house furnishings'. These account 1% in the Warren-Pearson All
Commodities Index.
All Commodity Index. For category weights see Table 1.
Montreal wholesale prices prior to 1867 are taken primarily from the Montreal Gazette published in a
section usually described as "Wholesale Prices Current". In certain years there was an individual description
of particular markets such as the "Leather Market". Occasionally there were annual reviews (1861 and 1863)
of monthly prices. These prices were quoted in other Montreal newspapers on an irregular basis over the
period: The Montreal Herald and Daily Commercial Gazette, The Montreal Transcript and Commercial
Advertiser, and The Pilot and Evening Journal of Commerce. Also The Morning Chronicle of Quebec
City and The Ottawa Citizen occasionally carried Montreal market information.
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 29
Appendix B
Wholesale Price Index, Monthly, and-1840 – 1871.
Average of 1860 = 100.00
Jan-40
Feb-40
Mar-40
Apr-40
May-40
Jun-40
Jul-40
Aug-40
Sep-40
Oct-40
Nov-40
Dec-40
Jan-41
Feb-41
Mar-41
Apr-41
May-41
Jun-41
Jul-41
Aug-41
Sep-41
Oct-41
Nov-41
Dec-41
Jan-42
Feb-42
Mar-42
Apr-42
May-42
Jun-42
Jul-42
Aug-42
Sep-42
Oct-42
Nov-42
Dec-42
Jan-43
Feb-43
Mar-43
Apr-43
May-43
Jun-43
Jul-43
Aug-43
Sep-43
Oct-43
Nov-43
Dec-43
Jan-44
Feb-44
Mar-44
Apr-44
May-44
Jun-44
Jul-44
Aug-44
Sep-44
Oct-44
Nov-44
Dec-44
Jan-45
Feb-45
Mar-45
Apr-45
May-45
Jun-45
100.1
99.2
99.3
97.3
96.3
95.4
94.4
93.1
96.1
95.7
96.2
94.4
92.7
91.0
89.3
87.6
85.8
84.4
84.6
83.7
87.3
86.8
85.0
84.5
84.0
83.5
83.0
82.6
82.1
79.2
79.4
78.9
75.8
75.3
71.7
71.6
71.5
71.5
71.4
71.4
71.3
71.9
73.7
72.5
71.7
71.0
70.2
70.4
71.6
72.8
74.0
75.2
76.4
75.0
74.1
73.4
72.7
71.0
70.3
70.5
71.8
73.6
75.5
77.4
79.6
78.9
Jul-45
Aug-45
Sep-45
Oct-45
Nov-45
Dec-45
Jan-46
Feb-46
Mar-46
Apr-46
May-46
Jun-46
Jul-46
Aug-46
Sep-46
Oct-46
Nov-46
Dec-46
Jan-47
Feb-47
Mar-47
Apr-47
May-47
Jun-47
Jul-47
Aug-47
Sep-47
Oct-47
Nov-47
Dec-47
Jan-48
Feb-48
Mar-48
Apr-48
May-48
Jun-48
Jul-48
Aug-48
Sep-48
Oct-48
Nov-48
Dec-48
Jan-49
Feb-49
Mar-49
Apr-49
May-49
Jun-49
Jul-49
Aug-49
Sep-49
Oct-49
Nov-49
Dec-49
Jan-50
Feb-50
Mar-50
Apr-50
May-50
Jun-50
Jul-50
Aug-50
Sep-50
Oct-50
Nov-50
Dec-50
76.9
76.5
79.3
80.3
83.7
84.7
86.5
85.0
83.6
82.2
80.8
79.3
77.5
77.7
78.9
82.1
83.5
84.1
84.8
85.4
86.1
86.7
87.3
96.6
94.6
89.6
89.6
89.3
87.3
85.2
83.2
81.2
79.1
80.1
81.2
78.7
76.6
78.5
78.3
78.9
83.1
81.5
79.9
78.2
76.6
75.0
73.4
73.7
73.3
74.1
74.9
74.0
75.1
75.3
75.3
80.1
82.3
84.4
83.5
83.3
83.0
74.8
73.4
75.4
74.1
73.9
Jan-51
Feb-51
Mar-51
Apr-51
May-51
Jun-51
Jul-51
Aug-51
Sep-51
Oct-51
Nov-51
Dec-51
Jan-52
Feb-52
Mar-52
Apr-52
May-52
Jun-52
Jul-52
Aug-52
Sep-52
Oct-52
Nov-52
Dec-52
Jan-53
Feb-53
Mar-53
Apr-53
May-53
Jun-53
Jul-53
Aug-53
Sep-53
Oct-53
Nov-53
Dec-53
Jan-54
Feb-54
Mar-54
Apr-54
May-54
Jun-54
Jul-54
Aug-54
Sep-54
Oct-54
Nov-54
Dec-54
Jan-55
Feb-55
Mar-55
Apr-55
May-55
Jun-55
Jul-55
Aug-55
Sep-55
Oct-55
Nov-55
Dec-55
Jan-56
Feb-56
Mar-56
Apr-56
May-56
Jun-56
73.9
76.9
77.4
76.8
78.3
77.7
80.1
81.6
82.3
84.5
84.4
84.0
84.0
84.7
84.6
85.8
85.3
86.2
80.7
86.8
85.5
83.4
86.0
85.9
91.0
92.2
94.8
90.3
88.0
85.1
89.9
94.3
104.0
104.1
99.6
100.7
106.2
110.2
117.2
119.8
125.0
124.6
123.0
122.2
124.1
126.0
128.8
128.7
131.2
131.2
130.9
137.3
149.1
126.4
120.9
121.7
124.6
118.7
125.3
126.5
122.5
124.6
118.0
118.0
118.0
115.6
Jul-56
Aug-56
Sep-56
Oct-56
Nov-56
Dec-56
Jan-57
Feb-57
Mar-57
Apr-57
May-57
Jun-57
Jul-57
Aug-57
Sep-57
Oct-57
Nov-57
Dec-57
Jan-58
Feb-58
Mar-58
Apr-58
May-58
Jun-58
Jul-58
Aug-58
Sep-58
Oct-58
Nov-58
Dec-58
Jan-59
Feb-59
Mar-59
Apr-59
May-59
Jun-59
Jul-59
Aug-59
Sep-59
Oct-59
Nov-59
Dec-59
Jan-60
Feb-60
Mar-60
Apr-60
May-60
Jun-60
Jul-60
Aug-60
Sep-60
Oct-60
Nov-60
Dec-60
Jan-61
Feb-61
Mar-61
Apr-61
May-61
Jun-61
Jul-61
Aug-61
Sep-61
Oct-61
Nov-61
Dec-61
117.2
120.2
118.6
118.0
119.9
116.2
111.9
114.3
118.8
118.5
126.4
128.9
127.4
128.9
125.3
120.2
111.9
108.3
107.4
104.6
105.6
106.0
104.5
104.6
103.5
105.5
104.9
104.1
101.5
101.7
99.0
103.3
104.4
105.4
105.4
105.4
103.7
99.1
98.4
98.9
99.8
101.1
102.3
101.9
101.1
100.4
101.2
97.7
96.6
98.4
99.5
99.5
98.0
98.5
97.5
96.6
92.7
93.9
94.6
91.7
92.8
93.9
97.5
97.2
95.5
95.9
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Jan-62
Feb-62
Mar-62
Apr-62
May-62
Jun-62
Jul-62
Aug-62
Sep-62
Oct-62
Nov-62
Dec-62
Jan-63
Feb-63
Mar-63
Apr-63
May-63
Jun-63
Jul-63
Aug-63
Sep-63
Oct-63
Nov-63
Dec-63
Jan-64
Feb-64
Mar-64
Apr-64
May-64
Jun-64
Jul-64
95.3
95.4
95.9
94.0
95.0
93.7
92.7
95.5
95.6
93.3
94.0
92.7
93.5
93.3
93.6
92.1
90.4
90.4
90.8
90.0
92.4
95.9
99.6
100.7
102.7
103.1
103.0
102.8
103.9
102.5
105.1
Aug-64
Sep-64
Oct-64
Nov-64
Dec-64
Jan-65
Feb-65
Mar-65
Apr-65
May-65
Jun-65
Jul-65
Aug-65
Sep-65
Oct-65
Nov-65
Dec-65
Jan-66
Feb-66
Mar-66
Apr-66
May-66
Jun-66
Jul-66
Aug-66
Sep-66
Oct-66
Nov-66
Dec-66
Jan-67
Feb-67
105.7
102.7
104.0
101.5
100.7
102.0
101.2
101.3
101.1
102.4
99.3
99.0
101.9
106.4
116.0
117.3
114.8
113.7
115.3
115.5
119.1
118.5
116.0
113.8
113.4
117.0
116.3
114.1
113.5
115.0
115.4
Mar-67
Apr-67
May-67
Jun-67
Jul-67
Aug-67
Sep-67
Oct-67
Nov-67
Dec-67
Jan-68
Feb-68
Mar-68
Apr-68
May-68
Jun-68
Jul-68
Aug-68
Sep-68
Oct-68
Nov-68
Dec-68
Jan-69
Feb-69
Mar-69
Apr-69
May-69
Jun-69
Jul-69
Aug-69
Sep-69
115.3
116.8
118.5
114.1
111.0
110.7
110.9
108.7
109.8
110.2
112.9
112.9
115.3
116.8
115.2
110.1
109.4
107.9
107.8
107.2
108.9
108.2
110.8
110.6
110.2
109.5
110.2
107.6
107.6
108.3
108.9
Notes: Figures in italics between Jan. 1840 and Dec. 1849 are interpolated.
Oct-69
Nov-69
Dec-69
Jan-70
Feb-70
Mar-70
Apr-70
May-70
Jun-70
Jul-70
Aug-70
Sep-70
Oct-70
Nov-70
Dec-70
Jan-71
Feb-71
Mar-71
Apr-71
May-71
Jun-71
Jul-71
Aug-71
Sep-71
Oct-71
Nov-71
Dec-71
Page 30
106.3
104.9
105.4
104.0
101.4
102.8
103.8
107.7
110.3
112.9
112.0
113.2
112.3
112.9
110.7
112.4
114.5
112.5
110.6
106.2
108.1
107.1
107.2
106.8
109.8
111.5
112.3
Canadian Wholesale Price Index Paterson & Shearer June, 2001
Page 31
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